Upheld: Fraud reimbursement (APP scams) complaint against Starling Bank Limited
Financial Ombudsman decision DRN-5838274 of 2026-06-26T00:00:00+00:00. Fraud reimbursement (APP scams) complaint against Starling Bank Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-5838274 |
|---|---|
| Decision date | 2026-06-26T00:00:00+00:00 |
| Firm | Starling Bank Limited |
| Product | Current account |
| Claim type | Fraud reimbursement (APP scams) |
| Outcome | Upheld |
| Remedy | Refund of £65,000 plus 8% simple interest per annum from the date Starling declined the claim or 15 days after the claim was first made, whichever is earlier. Starling Bank Limited is entitled to take assignment of rights to all future distributions arising from the scam payment (such as from police investigation and criminal proceedings) before paying the award, subject to providing a draft assignment to K for consideration and agreement. |
Summary
Mr I, as director of K, invested £65,000 with company C, which purported to offer social housing investments, but C was operating a sophisticated Ponzi scheme. Mr I conducted reasonable due diligence including checking Companies House, speaking with C's representatives, and viewing properties. Starling Bank declined to refund the loss, citing insufficient due diligence by Mr I and claiming effective warnings were provided. The ombudsman upheld the complaint, finding the payment met the CRM Code definition of an APP scam because C had no genuine intention to use investor funds for property development, as evidenced by receiving £20.2 million from investors but only spending £6 million on property-related activities, paying investors £2.5 million from only £440,000 in legitimate income, and having no genuine contracts with local authorities. The ombudsman determined Mr I had a reasonable basis to believe C was legitimate and that Starling's warnings did not meet CRM Code criteria for effectiveness.
The Ombudsman's reasoning
The ombudsman determined that the payment met the CRM Code definition of an APP scam because C deceived Mr I into transferring funds for what he believed were legitimate property investment purposes, but C was actually operating a Ponzi scheme with no genuine intention to use funds for property development. The evidence demonstrated C received £20.2 million from investors but only spent £6 million on property-related activities, paid investors £2.5 million from only £440,000 in legitimate income, made payments unrelated to property development, and had no genuine contracts with local authorities despite claiming to. The ombudsman found Mr I had a reasonable basis to believe C was legitimate given his due diligence, the involvement of a legitimate agent, professional documentation, and the absence of clear public concerns about C at the time. The ombudsman rejected Starling's arguments that Mr I lacked reasonable belief in C's legitimacy and that effective warnings were provided, finding the warnings did not meet CRM Code criteria and would not have been impactful given the scam's sophistication and lack of adverse information about C at the time.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Starling Bank Limited, all decisions | 1,021 | 25% |
| Fraud reimbursement (APP scams), all decisions | 20,976 | 21% |
| Current account, all decisions | 52,014 | 19% |
Source
Read the original decision on the Financial Ombudsman Service website